Polkadot is an advanced blockchain protocol. It is designed to connect multiple specialized blockchains into a single network. Traditional blockchains operate independently and do not communicate with each other. The lack of interoperability is one of the main problems that different blockchains are trying to solve.
Table of contents
- Who Created Polkadot?
- How Does Polkadot Work?
- What Problems Does Polkadot Solve?
- The Role of DOT Token in the Polkadot Ecosystem
- Parachains and the Polkadot Ecosystem
- Polkadot vs. Ethereum: Key Differences
- The Future of Polkadot
Polkadot enables seamless communication and interoperability between different blockchain networks. This allows to improve the scalability, security, and efficiency of the entire ecosystem, and this is what makes Polkadot one of the most promising projects in the crypto world.
The Purpose of Polkadot
Polkadot was created to solve key limitations of existing blockchains, such as scalability, interoperability, and governance. The main goals of the project are:
- To allow different blockchains to communicate and share data.
- To enable multiple blockchains to run in parallel to increase transaction throughput.
- To provide a shared security model that would protect all blockchains that are connected to the network.
- To allow token holders to vote on protocol upgrades and network changes.
Polkadot creates a more efficient, decentralized internet that consists of many blockchains, and all those blockchains work together.
Who Created Polkadot?
Polkadot was founded by Dr. Gavin Wood, one of the most influential figures in the blockchain industry. Wood is also a co-founder of Ethereum and the creator of Solidity, the programming language that is used for Ethereum smart contracts.
Development and Launch
The Polkadot project was officially launched by Web3 Foundation. The Web3 Foundation is a non-profit organization dedicated to decentralized web technologies. The foundation supports Polkadot’s development and promotes research in blockchain technology.
The network was launched in several stages.
In 2016, Gavin Wood introduced the concept of Polkadot in its whitepaper.
In 2017, Web3 Foundation conducted an initial token sale. It raised over $140 million during the sale.
The Polkadot’s mainnet was launched in 2020. Since then, developers have been able to build and deploy parachains.
Now, Polkadot is one of the most advanced blockchain ecosystems.
How Does Polkadot Work?
Polkadot has a unique architecture. It enables different blockchains to interact without losing in scalability. The main components of the network are the following.
Relay Chain
The Relay Chain is the main component of the entire Polkadot network. It handles the network’s security, consensus, and cross-chain interoperability. Relay Chain itself has a very limited functionality, but it coordinates the entire ecosystem.
Parachains and Parathreads
Parachains are independent blockchains. They run in parallel to the Relay Chain. Each parachain has its own rules, consensus mechanism, and a governance model. This is why they are highly customizable.
Polkadot also supports parathreads. They function similar to parachains, but they don’t need a specific place in the network, like parachains do. Parathreads share resources and pay for the usage of those resources only. This is why parathreads are very good for smaller projects with limited financing.
Consensus Mechanism: Nominated Proof-of-Stake (NPoS)
Polkadot uses the Nominated Proof-of-Stake (NPoS) consensus. This is how it works.
- Validators validate transactions and produce new blocks. With it, they secure the network.
- Nominators stake their DOT tokens to support validators.
- Collators collect transactions and forward them to the Relay Chain. With it, they maintain parachains.
- Fishermen monitor the network for any fraudulent activities.
This system allows to ensure the top security level and is very energy-efficient if you compare it with PoW blockchains such as Bitcoin.
What Problems Does Polkadot Solve?
Blockchain interoperability is one of the main problems that Polkadot solves. Most blockchains are isolated, and this limits their ability to share data and assets. Polkadot allows them to inter-operate and exchange information in a secure environment.
Most blockchains lack scalability. Their networks are often congested, and it leads to slow transaction speeds. Polkadot allows blockchains to run in parallel, and it improves transaction throughput.
Most blockchains use their own security models. It makes them vulnerable to attacks. Polkadot provides shared security, all parachains are responsible for maintaining the network secure and all benefit from the security of the Relay Chain. This is why the risk of attacks is reduced, and the entire ecosystem is safer.
The Role of DOT Token in the Polkadot Ecosystem
DOT is the native coin of the Polkadot ecosystem. It performs a lot of functions in the network, such as governance, staking, transaction fees, and some more.
Staking DOT
Polkadot’s NPoS consensus relies on staking. Users can lock their DOT tokens to contribute to the security of the network. In return, users earn staking rewards.
Governance and Voting
DOT holders can propose and vote on changes to the Polkadot network. This governance model provides the community the control over the protocol upgrades and the changes to policy.
Buying and Storing DOT
DOT tokens can be purchased on most exchanges. It can be stored in the majority of hardware and software wallets. Among the most popular wallets where you can store DOT are Ledger, Trust Wallet, and Polkadot.js Wallet.
Parachains and the Polkadot Ecosystem
Parachains are independent blockchains, they are connected to the Polkadot network. Each parachain can have its own use case. For example, one blockchain can be used for decentralized finance (DeFi), another can be applied for identity verification, or gaming.
Projects Building on Polkadot
Many innovative projects have launched on Polkadot because of its advanced infrastructure. Here are just a couple of them:
- Acala: It is a DeFi hub that offers stablecoins, staking derivatives, and liquidity pools.
- Moonbeam. It is a smart contract platform. It is compatible with Ethereum and allows developers to migrate their dApps easily.
- Astar: It is a multi-chain smart contract platform that supports Ethereum Virtual Machine (EVM) and WebAssembly.
Polkadot vs. Ethereum: Key Differences
Ethereum focuses on its own network, and Polkadot allows multiple blockchains to communicate and share data and assets.
Polkadot offers on-chain governance. It allows token holders to vote on protocol updates. Ethereum’s governance is more centralized, and all key decisions are often made by developers.
Polkadot and Ethereum compete in some areas, however, they also have complementary functions. Polkadot’s interoperability could allow Ethereum-based applications to integrate with its ecosystem, and it would be useful for collaboration.
The Future of Polkadot
The Polkadot ecosystem grows and attracts more developers and projects. The more parachains are introduced, the wider adoption the ecosystem enjoys. This is why analysts believe that the DOT value will grow over time.
Even though Polkadot has a very strong foundation, it also faces some challenges. The main challenge is a high competition level. Another problem is regulatory uncertainties that could impact the blockchain adoption in general and the project specifically. Finally, the project may face technical challenges, too.
However, we believe that the Polkadot ecosystem will continue to grow and develop. The project can offer solutions that would improve many walks of life, such as finance, gaming, supply chain management, and many more.